Alice Gets After Bankruptcy Car Loan at 4.76%

In less than a year, Alice is approved for an after bankruptcy car loan on a Nissan Versa at 4.76%

Alice came to see me in March 2015. She’d just gotten back to work after being out for over a year. Her financial situation was so bad, she’d been living in a women’s crisis center, at very low rent We filed a Chapter 7 bankruptcy. Even working again, she could not afford her credit cards. I told her filing bankruptcy was the fastest way back to good credit. Much better than continuing to send in late and partial payments.

Good news in April 2016. Alice just emailed me to tell me about her after bankruptcy car loan.

Here’s the rest of the story in her own words.

Hi Bob,

So as you may recall, after my bankruptcy discharge in June, three months later at the end of August I had to turn in my leased Honda.

You told me that every month I could wait for a car I would save. So I have lived without a car for seven and a half long months.

I have walked and taken the bus and the metro through the winter. And it looks like it’s paying off!

On Saturday I went to a Nissan dealer, and they were able to get me financing at 4.76% for a shiny new black 2015 Versa Note SV! Today I went back there tonight to make sure the bank had actually given final approval for the financing at that rate – I told them on Saturday that even though it was in the range I was pre-approved for, I thought it was too good to be true.

But apparently it IS true! They showed me the screen today that tells them they have received final approval, and they assured me that they have it.

Less than a year after Chapter 7 discharge, I have a new car at 4.76% – 259 a month for 72 months! (I know that’s long but this is a new Nissan with some options that should help the resale value and I plan to refinance in 6 months or a year for a lower interest rate and shorter term.)

It’s been a slog for 10 months but maybe I’m seeing the light at the end of the tunnel!

Thank you again, SO much, for everything! The world needs more of you.

Terrance was standing outside my door when I unlocked, Friday last week.

Terrance filed Chapter 7 bankruptcy with me, January 2013. I tell people you can get approved for a mortgage as soon as two years after your bankruptcy discharge. Terrance got his mortgage approved two years and four months after his bankruptcy. Or he thought he did. They told him in December, everything was fine. Last Thursday, they turned him down. He was scheduled to close on his new house, Tuesday. He freaked.

There was a problem on Terrance’s After-Bankruptcy Credit Report

In December, the mortgage company said they’d fix the problem on Terrance’s credit report. They didn’t.

When he first applied for the loan, the mortgage company told him there was a problem. One of the debts discharged in his 2013 bankruptcy looked like it was still there. Terrance made an appointment to see me last December; but then he cancelled.

The mortgage company told him they would take care of it. Turned out they didn’t.

Here’s the happy ending.

I’m one of maybe fifty bankruptcy lawyers around the country who fights all the time for my clients to fix their after-bankruptcy credit report. Because of my experience, I knew the compliance officer at the outfit that was causing the problem. I had his phone number and email, and he was in his office that Friday morning. I got him.

By noon, we got the paper the mortgage underwriter needed, showing that debt was taken care of in the bankruptcy. The mortgage got approved Monday. Terrance bought his house on schedule, Tuesday.

Two Lessons

I think every bankruptcy lawyer needs to know at least a little about Fair Credit Reporting. You don’t really get your “fresh start” in bankruptcy, if your after-bankruptcy credit report is wrong.

You should really check your credit report, with your lawyer, a couple months after your bankruptcy is over. (And keep checking it.) Don’t wait until you are turned down for your after-bankruptcy mortgage.

My Promise

I promise to fight for you to make your after-bankruptcy credit report right, for as long as five years. You can read more about that, here.

Most bankruptcy lawyers will have nothing to do with after-bankruptcy credit reports; and sometimes it makes a enormous difference.​

Ford Credit Has the Right to Pick Up You Car When you File Bankruptcy, Even If You Are Current.

Actually, under the 2005 bankruptcy reform, any car finance company can pick up your car when you file bankruptcy. But Ford Motor Credit is the only national lender that does that. (A few states have laws that protect you. Virginia, where I am, isn’t one of them.) Most lenders would rather get payments than get the car.

Ford wants to you to reaffirm your debt with them. When you reaffirm, you take the debt complete out of the bankruptcy. After a short waiting period, you can’t change your mind.

As your lawyer, I don’t like reaffirming debts. If you reaffirm and can’t make the payment, you get an after-bankruptcy repossession on your credit. An after bankruptcy repossession pretty much guarantees seven years with bad credit. An after bankruptcy repossession (on a reaffirmed car) probably means an after bankruptcy judgment and an after bankruptcy garnishment. A real mess.

I don’t like reaffirming your car loan with Ford Motor Credit. On the other hand, you may not like walking to work.

On the other hand, you probably don’t want to walk to work.

So before you reaffirm with Ford Motor Credit, I’m going to ask you some questions.

Are you really happy with this car? Has it shown any signs of mechanical trouble?

Do you have some other way to get around? Do you have a junker that will be good for a year or two, until you get good credit?

Could you in fact get around on bus or Metro for a while?

Did Ford give you a really good deal when you bought this car.

After we talk about all that, maybe you’ll decide to let Ford take the car. If you insist, you and I will sign the reaffirmation and Ford will let you keep the car. (As long as you keep up the payments.)

Because reaffirmations are so dangerous, the law requires your lawyer–that’s me–to sign off that I think it’s a good idea. (Usually, I don’t think it’s a good idea. “Let them eat steel,” is what bankruptcy lawyers like to say.) And many people also have to explain it in person to the judge. Because of the long and annoying paperwork, here, and possible court appearance, I charge another $200 to handle car reaffirmations with Ford.

If you give the car back to Ford, it won’t take that long to buy a new one at a good price.

I tell people to wait three years, if possible, after the bankruptcy, in order to get the best deal on new car financing. (And whatever you do, do NOT go out and finance a car at 21% the week your bankruptcy is final.) But even a year and a half after bankruptcy, you can rebuild your credit and get a car loan at a good rate. Alice got a Nissan, from the dealer, at 4.76% barely a year after.

Usually, unless the dealer is having trouble selling cars, you’ll get your best rate on a car from a credit union.